Observations by an academic researcher on the use of “open”-ness as a competitive strategy, with a particular interest in coping with the commoditization of information goods and technologies in an Internet-enabled world.

Wednesday, October 31, 2007

One way to make lots of money is to create and control a popular platform. But sometimes it's possible to control a platform without creating it, often by creating an abstraction layer to unify previously disparate APIs.

The idea that the Google APIs will provide commonality (and thus direct network effects) by combining a range of 2nd tier social networking sites, including Friendster, LinkedIn and Google's own Orkut. Noticeably absent are the US market leaders, MySpace and Facebook. (This confirms the point I made a few years back that shared or common APIs are always a strategy of losers trying to catch winners).

As Business Week reported:

If the plan is successful, Google could bring its leverage to bear on the social networking market and potentially slow the momentum of high-flying Facebook. "This is an open version of what Facebook has done," says Marc Andreessen, a co-founder of Ning, which provides tools for building social networks. Andreessen was the founder of Netscape Communications in the '90s. ...

For Google, OpenSocial is the first step in a plan to hit back at Facebook and Google's chief rival, Microsoft (MSFT), which on Oct. 25 announced a $240 million investment in Facebook (BusinessWeek.com, 10/25/07), beating out Google for a stake in the fast-growing company, now worth an estimated $15 billion.

Today was also the day that Google's march to world domination reached another milestone with a $700+ stock price and a $220 billion market cap that left America's largest banks in the rear view mirror. Only four US companies have a larger market cap: Exxon Mobile, GE, Microsoft and AT&T.

A pretty good week for a company that still has yet to announce its major platform initiative of 2007 (the gPhone).